Behind the Scenes at Loot Crate. How cool geek and gamer gear ends up on your doorstep!

It’s 11 am on a Wednesday. I’ve pulled up to a non-descript warehouse space in Pasadena, so non-descript I’m not entirely sure at first if I’m in the right place. The sign above the door is from a water treatment company. It’s not until I’ve rounded the parking lot that I see a giant black bus with “LOOTCRATE” painted on the side. Peaking inside the warehouse I see an incredible number of small black boxes stacked up, about ten feet tall, but we’ll talk about that more in a bit.

I’m here to chat with Matthew Arevalo, one of the Co-Founders of Loot Crate. Loot Crate is a subscription box service focusing on geeks and gamers. Each month, for less than $20 after shipping and handing, a small black cardboard crate is delivered to subscribers’ doors filled with various products which might appeal to the geek chic. Previous boxes have had t-shirts, candy, stickers, gaming peripherals, sunglasses, and even a copy of The Zombie Survival Guide. Matthew has invited me in to take a quick peek behind the scenes.

Where they came from…

Loot Crate was formed in August of 2012, following a Startup Weekend event in LA, which they didn’t even win. Matthew’s partner Chris Davis ran a previous venture called ‘Gamer Food’ and he understood product and procurement. Matthew ran a company which helped track social trends and metrics for clients wanting more social media exposure. The entire idea behind Loot Crate was built over 48 hours, and before the Startup Weekend pitches were over, they were already fielding customers. It took less than a month to start sending out the first Crates to a small group of initial, curious consumers. Those first boxes were simple cardboard with a Loot Crate rubber stamp on the front.

A year later, Loot Crate is now two months into this new warehouse, and they’re already starting to outgrow it. That wall of boxes is about 60% of what they’ll ship this month.

One of the first Loot Crates.

The success of Loot Crate seems to move beyond just what’s inside each month’s box. There’s something fun, to be sure, about opening a mystery box of gear each month, but the company’s entire approach is designed around celebrating communities. Matthew is a numbers and metrics guy, and his passion for tracking content is infectious. He competently explains Loot Crate’s Mission Statement, but he lights up at the opportunity to swivel his desktop monitor around, showing me what’s trending throughout the various Loot Crate communities. He delights in pointing out the YouTube analytics for their recent push into producing original online videos, and how spikes in video traffic might correspond to new paying subscribers for their service.

What’s refreshing is the lack of cynicism. He’s not talking about trying to game Twitter, Facebook, or Youtube for his own purposes. The company’s marching orders are to genuinely participate on each social network. They keep a shared Google spreadsheet of “best practices” for each network. Instead of trying to boil each network down into some kind of formula for monetization, it reads simply, like a common sense approach to meeting people at a party.

Different people go to different websites for different experiences. Respect that.

In an age where many “gurus” think they can simply dump a brand message on a social network or push ads into our faces like TV and Radio, the Loot Crate “respect” approach would seem to work much better. Those of us who work around the entertainment and advertising industries hear often from people who are “making viral videos” or are “leveraging crowd funding opportunities”, or some other hip buzzword nonsense.

While Loot Crate is a commercial venture, and the content they produce hopefully will result in more sales, there’s a startling lack of brand messaging throughout their various social media accounts. You’re as likely to see something random and fun from them on Instagram as you are to see one of their black and orange crates. You might see items from a Loot Crate in a video they produce, but the videos often aren’t about the Loot Crate service. Matthew lives for metrics, but while discussing their most recent Youtube production, he mostly seems concerned with whether or not people enjoyed the video. For him, those numbers make more sense as a longer term investment.

Celebrating Internet Communities

It doesn’t hurt that Loot Crate can often take a back seat in talking about their own service to the various vloggers, podcasters, and writers that produce content. An early part of the Loot Crate DNA was built on reaching out to influential Tweeters and Youtubers, niche internet celebrities with audiences which might be interested in what Loot Crate has to offer. Each month there’s a Mega Crate awarded to a Looter who shared their unboxing or review of the crate online. The Mega Crates contain much more expensive gear, and previous Mega Crates have had game consoles in them. All of this reinforces the idea of sharing and participating, striking up discussion, and exposing new people to the service.

Themes become one of the Crate’s strongest selling points. Each month the company announces a general theme, but the actual box’s contents remain a secret until they’re shipped out. It adds to the fun, being in on solving a mystery. Looters converse online speculating on what the theme might mean, and Matthew encourages his staff to play with their audience. A theme of “Doctor” for example might go geeky and include Doctor Who loot, or they might go retro-gaming with Doctor Mario gear. It’s a game within the service which encourages more discussion and participation. It’s more considered than just buying a box of stuff each month.

A 21st Century Company

It’s a company which just couldn’t have existed even as little as five years ago. They way people interact with each other online has radically evolved, with public sharing becoming more commonplace. It provides Loot Crate a tremendous amount of flexibility in how they can disseminate a message without resorting to traditional forms of advertising. Advertising which can turn off as many people in this geek/gamer demo as attract.

This company is about as grassroots as you can get. They aren’t funded by outside investors, and all of their internal systems are built off of standard web and cloud based tools we all have access to. It’s a Google Docs and Apps kinda company.

Even the internal structure of the company can be fluid, and each team member is partially responsible for their own R&D on new social networks and services to participate on. With a growing subscriber base, it allows them to be somewhat reactionary about where they invest man hours. If a ton of folks start sharing Loot Crate on Pinterest for example, the Loot Crate team can respond there and strike up more relationships. They can leave the discussion there however, as there’s no need to move Pinterest users to some other platform to “monetize the discussion”. There’s a touch less pressure to form a traditional PR division for seeding materials out to various networks when a good number of your customers are already doing that leg work for you.

The Loot Crate team is pushing more mobilization and putting feet on the ground at shows and conventions. Their bus plays into being on the ground at events. They secured a table at the San Diego Comic Con. They were around at Comikaze, and I was introduced to the company at a REACH event through TechZulu. Their presence is subtle (giant bus notwithstanding), but they know who their audience is and where’ll they’ll be.

They benefit greatly from being brand new. Their team knows social media, and the core of Loot Crate is built around those various services for community outreach and discussion. They aren’t an established company trying to figure out new communication technologies.

The Challenges of Growth…

It’s not to say there haven’t been the occasional missteps. For a company this small and growing this fast, they’re working through some issues of scale. Packing and shipping this many boxes introduces some unique challenges. Customers supply their preferred t-shirt size for crates with shirts, for example. Making sure the right shirt is paired with the right customer is easy with a couple hundred customers. Expand that system to tens of thousands, and you have a potential logistical nightmare. No small feat as all of the boxes are packed and shipped over a period of days.

What actually goes inside each box introduces challenges as well. Chris and Matthew’s backgrounds brought great relationships to the table, and companies are now looking at Loot Crate’s audience as a desirable way to target products and services to specific consumers. With themes, packaging, and printing high quality magazines for each month’s crate, the team can only stay about two months ahead of what they’re shipping each month. That means coordinating with companies to makes sure product is available and hiring part time staff to actually pack each box.

Not to mention that not every item is going to be a winner. The nice thing about the Loot Crate audience is the understanding that this is a process, and each month will feature a variety of products. From a pure price perspective, a novelty t-shirt alone will often cost more by itself than what a Crate will cost each month. Matthew openly discusses the strategy for item selection. Their goal is to include as broad an audience of people as possible. Wide age range demographics (Loot Crates are family friendly), gender neutral, and they want to know that for each of their customers, at least one (but hopefully two) products in each Crate are absolute winners. Even if an individual item might be a dud, it shouldn’t detract from the joy of a winning item also being in the box. In hindsight however, the Bacon flavored lip balm packed in one previous Crate was probably never going to win many people over…

About the only time Matthew gets a little shifty during our warehouse visit is when I ask what their current shipping customer base is. They’re at a tricky stage of company growth. The internet has problems with “sell outs”, and Loot Crate is growing fast. They’re audience is heavily socially networked, and those kinds of consumers have a feeling of ownership over the services they support. They helped build Loot Crate. Perception is everything. Managing growth without alienating early supporters is a delicate dance. Best I can get out of him on the record is “We’ll ship over 40,000 boxes this month”. It’s sensitive info, as we’re also starting to see competitors pop up, targeting Loot Crate’s audience. Looters have a solid lead right now, but the internet can be a fickle mistress.

Moving Forward…

Now expansion is the name of the game. Not only expanding their customer base, but moving into new services for their community. They’re moving beyond the monthly crate subscriptions to offer up individual flash sales on single products, and building special premium gift crates for people to send to friends and family. They’ve also started a new blog, The Daily Crate, to share more cool geek and gamer news and reviews. All of these tangentially point back to Loot Crate subscriptions, but their primary focus seems to ride on expanding the Loot Crate ecosystem. In the tech space, we too often see startups offer a new cool service for free, and then struggle with monetizing after it becomes popular. Loot Crate has flipped this formula on its head. They have a monetized service which their subscribers seem to enjoy, and now they’re building out more “cool” surrounding it.

It’s easy to get caught up in the excitement surrounding Loot Crate. It’s a great mashup of disciplines and timing. With how cynical we can get about new start-ups and pitches, seeing a small business in action, growing and succeeding, just brings a smile to my face.

Walking the halls of their new-ish warehouse, the aisles of past product, the huge pallets of packed t-shirts and unfolded cardboard crates ready to be assembled for customers, I make a joke about feeling like I’m walking through the end of ‘Raiders of the Lost Ark’. Matthew gives me a grin and a nod. He’s got ten months left on his lease here, and I know he’s already shopping a larger space.